Court to hear Medicaid cuts challenge

WASHINGTON, Jan. 18 (UPI) -- The U.S. Supreme Court agreed Tuesday to decide whether federal law pre-empts state reductions in Medicaid payments.

The justices consolidated three cases out of California, but the outcome of the dispute would affect states across the country struggling with budget deficits and looking for ways to cut costs.

In one of the cases, a group of pharmacies, healthcare providers, senior citizens' groups and beneficiaries of California's Medicaid program, Medi-Cal, asked a federal judge to issue an injunction keeping the state from reducing Medicaid payments to certain providers by 10 percent.

A federal judge at first agreed with the state that its policy was not pre-empted by federal law outlining the payments, but a federal appeals court reversed. In a second hearing, the judge agreed with the challengers, saying the challenge deserved an injunction because the challengers would probably succeed at trial on the merits of their argument. But the judge said the injunction only applied to payments on or after the filing of the case.

This time around, a federal appeals court panel upheld the judge on the merit of an injunction but reversed the part of the lower-court ruling that limited payments.

"The district court did not abuse its discretion in determining that the balance of hardships tips sharply in (the challengers') favor, as the 10 percent rate reduction threatens access to much-needed medical care," the appeals court opinion said. "We therefore affirm the district court's order granting in part (the challengers') motion for a preliminary injunction. However, the district court's subsequent order modifying the injunction to apply only to payments for services provided on or after Aug. 18 was based on an erroneous legal standard."

The Supreme Court should hear the combined case early next term.